Buying Gold | Is Mrs. Watanabe <b>Buying Gold</b>? [CurrencyShares Japanese Yen <b>...</b> | News2Gold |
| Is Mrs. Watanabe <b>Buying Gold</b>? [CurrencyShares Japanese Yen <b>...</b> Posted: 31 Mar 2014 05:22 AM PDT Summary
Implementation of the Japanese consumption tax, from 5% to 8% is going to commence on April 1st, another phase of Abenomics. Attempting to reverse two decades of deflation, PM Abe has aggressively expanded the government's deficit spending. The goal is a 2% inflation rate. Critics of the new economic plan have rightly observed tax revenues are less than 45% of expenditures. The Japanese accumulated sovereign debt is over 230% of the GDP. Perhaps economic growth will eventually bail them out, but they also need additional revenue. Therefore the consumption tax is beginning, and there will be another increase to 10% in 2015. Because of deflation the consumer became accustomed to postponing purchases. Now, with higher prices are anticipated, retail trade reports show the consumer has been only modestly more active. After all, how many appliances does an aging population need. Fooling the Japanese consumer is not going to be easy. Traditionally the money has been managed by women, the mythical Mrs. Watanabe. Allegedly this canny manager of the family funds has been successful investing in multiple asset classes. The shift in asset allocation to equities last year helped to raise household financial assets to a record ¥1.63 quadrillion. Now it looks like the Japanese savers are investing some of their saving in gold prior to the tax increase. According to the Financial Times:
Mrs. Watanabe may have made her decision. It is better to own a gold bar, than a shiny new washing machine, or a new Toyota (TM). Holding government bonds yielding only .62% has little appeal, and the future value of the yen is suspect. PM Abe's attempt to revive the moribund economy, targeting a 2% inflation rate as a goal, is already having unintended consequences. For the year the CPI in Tokyo is up 1.3%. The lower yen, however, has meant more expensive imported energy and food. Exclude those costs from the CPI, and it is up only 0.4%. There is another major problem with Abe's 2% inflation goal. Currently the yield on a ten year sovereign noteas previously mentioned is 0.62%. If we figure the real value of money is .5 to 1% above the inflation rate, this would put the ten year yield close to 3.0%. Currently there is close to $11T in outstanding debt. This means the value of the existing bonds would crash. Banks who are required to mark to market the value of their bond inventory would not survive. Further, the government could not refinance the outstanding debt. For the owners of yen denominated investments, Mrs. Watanabe's investment of gold make sense. For those that continually buy the yen as a safe have, this makes no sense. As John Mauldin has repeatedly said, "the Japanese economy is like a bug looking for a windshield." The demand from the Japanese investors for gold may not be big enough to make a dent in the huge global market, but it does illustrate weakness in the Abe plan, and some things are beyond Abe's control. Demography of Japan is a major problem. Between 2010 and 2012, the population dropped from 128,056 026 to 126, 981,371. Ethnic Japanese comprise 98.5% of the population, as immigration is not possible. In 50 years 40% of the population will be over 65 and the population will be under 100M. Contrast this demography to the one in the UK. Between 2010 and he end of 2012, the population increased from 63.022M to 63.896M. For the year ended in 2013, there was a net immigration into the UK of 212,000. Not all of the immigrants of the poor seeking work. There have been so many multimillionaires flocking to London from Russia some are starting to call in Londongrad. The British economy is vibrant and growing much faster than their neighbors on the continent We intent to take a more detailed review next week, but it is our opinion that the pound is more of a safe haven than the yen. Longer term we think the pound is positioned to far out perform the yen. Since the breakout of the pound versus the yen with the arrival of PM Abe in late 2012, the pound has rallied from 135 to 174. So far in 2014 the (GDPJPY, FXY, FXB,) has been consolidating in a sideways move. Much of this market action may be the result of liquidation of the massive short Japanese yen position. Once the stale shorts in the yen are gone we think the pound will gain on the yen. It may take quite a while to get there, but the monthly chart tells me the upside objective is 200 or better. Manage your money because this could be a wild one. (click to enlarge)
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| Is There Any <b>Gold</b> Left For Central Banks To <b>Buy</b>? – Jeff Nielson <b>...</b> Posted: 02 Apr 2014 09:47 AM PDT In Jeff Nielson's recent article on Bullion Bulls Canada, he examines why the emerging markets have slowed down on gold purchases and leads us to the conclusion that there in no more gold left for central banks to buy. March 31, 2014 Here is a conundrum for readers to unravel. Throughout 2011, 2012, and early into 2013; central banks in Eastern and Emerging Market nations went on the largest (official) gold-buying binge in history. This occurred as the currencies of these nations were relatively stable, and thus "inflation" pressures were relatively muted. Now flash-forward to early 2014. We have what the mainstream propaganda machine is calling "the crises in Emerging Market currencies" (versus all the currencies of the corrupt, Western bloc). Let's put aside the fact that the "collapse" of these currencies is just another mega-crime from the One Bank – committed while its banker-felons are currently being investigated for serial currency-manipulation. Forgetting about the cause of this "collapse", the effect of this plunge in the value of these nations' currencies is a spike in the rate of inflation. In other words; whatever was the precise motivation for these central banks to begin their gold-buying binge, those motivations would be stronger today. Yet despite a stronger motive, their gold-buying has practically screeched to a halt. The analogy here is a simple one. As summer begins (and people get thirsty), lemonade sales increase significantly. Yet just as a heat-wave arrives (and people are presumably even thirstier), lemonade sales suddenly collapse. There are only two plausible reasons which immediately assert themselves in this hypothetical scenario. Either the lemonade customers have no more funds to purchase lemonade, or the lemonade-makers have no more lemonade to sell. Relating this conundrum back to the real world, if there is one thing which we know for certain it is that all of these central banks have plenty of paper to use to exchange for gold, indeed, virtually infinite amounts. Absent a gold standard; the only thing restraining these governments in the creation of these paper currencies is their own (lack of) discipline. With "competitive devaluation" still the policy-of-suicide for all these governments; this translates into no discipline at all. It's pedal-to-the-metal with all this paper-printing, meaning that all these governments have mountains of 'money' to devote to their gold-buying. Clearly then, our primary suspicion must be that there is little – if any – gold left for these central banks to vacuum-up. Before pursuing this thinking further; let me deal with a few permutations of this scenario which may have occurred to astute readers. Obviously the collapse of all these currencies means that the price of gold (denominated in these same currencies) has spiked. Thus one possibility would be that these gold-buyers are simply waiting for more-reasonable prices. There are two reasons to reject such reasoning. First of all, as previously noted; these governments have essentially infinite amounts of paper to exchange for limited/finite quantities of gold. Playing-out such a scenario; as the price of gold begins to fall, instead of waiting for "the bottom", queue-jumpers would leap into the market to get their gold before supplies are exhausted. The point of logic here is that with infinite quantities of paper and (in relative terms) extremely limited amounts of gold available; the queue-jumpers would never even begin waiting for "better prices". They would have simply continued their gold-buying at the same robust pace we saw in 2011 and 2012 – knowing that the market will run out of gold long before they run out of paper to use in purchasing gold. More cynically; with all these governments playing their little game of Competitive Devaluation (where the object of the game is to drive one's currency to zero), there will never be "a good time" for them to buy – i.e. when the price of gold recedes any significant amount below current prices. It makes no sense for any government deliberately driving the value of its own currency to zero to wait for "better prices" for any hard asset. We also have the reasons put forth by Western banksters: …TDS comments that emerging-market central banks may be less willing to buy gold as they were when U.S. monetary conditions were easing. "Many emerging nations may see their reserves wane, or at the very least grow at a reduced pace. This implies that current holdings of gold represent a higher weight or that less purchasing is required to achieve a target portfolio weighting. Plus there is strong evidence that central banks are pro-cyclical – buying when prices are rallying and selling when they drop. Of course, coming from the mouth of a banker; this is all either fiction or half-truth. However, for readers to appreciate this, first this double-talk must be translated into English. Boiled-down; the line which the bankers are trying to sell is not that the lemonade-makers have no more lemonade to sell, but rather the lemonade-buyers have a lack of funds. Typically, we a banker engaging in more upside-down perversion: in their Wonderland Matrix, it's a world where supplies of paper are limited – but there is infinite quantities of "gold" for sale. Of course what these Snake-Oil Salesmen leave out of their analysis is that the infinite quantities of "gold" being sold by these same bankers are, in reality, just mountains of paper masquerading as gold. Putting aside that first absurdity; this mouthpiece for Western banking is trying to tell us that in a global economy with $100's of trillions floating around global markets (and over $1 quadrillion in the bankers' derivatives casino) that a reduction of $20 billion per month in U.S. money-printing would cause global gold-buying to collapse. Even more absurd; regular readers know that in the real world there has been no "tapering" of the U.S.'s out-of-control money-printing. The other suggestion from TD Securities is equally silly: that essentially these central banks have a pattern/history of buying high and selling low. This half-truth totally evades the crucial distinction that it's been Western central banks selling gold and Eastern central banks doing the buying. As sophisticated readers understand; Western banks were dumping gold on the market precisely to cause prices to fall. Meanwhile, Eastern central banks buy gold to protect their economies from (banker-created) "inflation", which is why we naturally see their gold-buying intensify when inflation spikes – and the price of gold is relatively high. Rejecting the banker propaganda; we return to our original presumption: that there is little gold available for these central banks to buy. We can test this presumption by applying it to what reliable anecdotal evidence is available. In 2013; at precisely the same time that central banks suddenly/dramatically pulled-back from their gold-buying binge, the following events were taking place. As a consequence of the Cyprus Steal; we had "the flight out of paper", where the Smart Money ditched all of the bankers' paper-called-gold which they were holding, and exchanged it for real gold, instead. This interpretation is substantiated with unequivocal market data. Holdings of the bankers' paper-called-gold "funds" collapsed by approximately 40%. Comex gold inventories in New York have plummeted by roughly double that amount. Meanwhile, with the paper-called-gold market (at least) one hundred times larger than the real gold market; panic-selling in this much larger (paper) market caused the price of gold to fall. In turn, this "sale" on (real) gold caused gold imports into the world's two largest gold markets – India and China – to spike to astronomical levels. At one point; by themselves these nations were importing gold at an annual rate of 4,000 tonnes per year. Clearly the logical presumption that there is little-if-any gold for these central banks to purchase (on the open market) is strongly supported by all available empirical evidence. Here it must be noted that two of the world's largest nations which have publicly acknowledged their large appetite for gold – China and Russia – are also two of the world's largest producers of gold (China is the largest). What continues to be misreported throughout the media is that nations which purchase gold on the open market must report/declare all such purchases (in a timely manner), while any gold which nations acquire domestically never needs to be reported. This is derived from our international rules on currency transfers. Despite decades of lies by Western bankers that gold had become "a barbarous relic"; these same bankers have never ceased to treat gold as money in all of their own rules and transactions. Just as is the case with U.S. money-printing, when it comes to accumulations of gold by central banks, we only have some of the data available, and thus we cannot make hard-and-fast conclusions about the overall accumulation of gold by Eastern/Emerging Market central banks. What we can conclude with safety is that there is little gold to be had on the open market – and thus many nations are now (literally) digging it out of the ground for themselves. Source: Bullion Bulls Canada |
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